The USD/CAD pair began the new week with a subdued performance, trading in a narrow range above the psychological level of 1.3500 during the Asian session. This follows a rebound from last week’s low of 1.3420, the lowest level seen since March 8. However, the mixed fundamental backdrop suggests caution for traders seeking a clear near-term direction.
The US Dollar (USD) is experiencing some haven flows due to escalating geopolitical tensions in the Middle East. Conversely, the Canadian Dollar (CAD) is pressured by expectations of a larger interest rate cut from the Bank of Canada (BoC), providing a tailwind for the USD/CAD pair. Yet, various factors are preventing traders from making fresh bullish bets, capping the pair’s upside.
Global risk sentiment received a boost from China’s announcement of additional stimulus measures over the weekend. Coupled with anticipations of more aggressive policy easing by the Federal Reserve (Fed), this development has limited significant gains for the safe-haven USD. Market expectations indicate a higher likelihood of an oversized rate cut by the Fed in its upcoming November meeting.
Additionally, concerns over a potential widening conflict in the Middle East are overshadowing worries about slowing demand in China, the world’s largest oil importer. This dynamic has supported crude oil prices, which in turn underpins the commodity-linked CAD, further contributing to the cap on the USD/CAD pair. Traders are now looking to Fed Chair Jerome Powell’s upcoming speech for fresh insights that could influence market direction later in the US session.
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